The Future Demand for Oil and Gas Worldwide

One of the goals of an oil and gas reserves evaluation is to spot trends in the marketplace that will help U.S. oil producers. Short-term variations get all the headlines, but long-term trends are even more important. Developing nations are requiring more and more oil for their modernization, which is bringing trends like national security, trade flow and economic policies into the mix. Nations such as China and India are sure to keep increasing their consumption of oil. This trend is easy to spot by those who have taken petroleum economics courses.

Given that oil is the top energy source in the U.S. and the developed nations, the consumption by other countries promises a continuous swelling of the worldwide demand for oil in both OECD (Organization for Economic Cooperation and Development) nations and those nations that are not part of the OECD. The OECD members include North America, Japan, Australia, New Zealand, Israel, Turkey, South Korea and most of Europe. Energy use is a key sign of a nation’s growth according to oil and gas risk management courses. All indicators and long-term projections suggest that demand will grow at an increasing pace for decades to come.

Although OECD countries are responsible for over 50 percent of the economic output of the world, in 2005, non-OECD nations were home to more than 80 percent of the globe’s population. That percentage has continued to change in the past decade and may be closer to 90 percent. This trend alone makes it easy to understand why 95 percent of the increase in world energy consumption growth is coming from non-OECD nations. The Energy Information Administration stated in its most recent Annual Energy Outlook report that energy consumption growth in those countries will increase by 72 percent by 2035. Over half of that energy growth will occur in the industrial sectors. Growth in the OECD nations is expected to be around 18 percent during that period. Increases in the demand for transportation in the non-OECD countries will make up the balance of their ever-increasing need for energy.

The swelling population and an increase in per-capita income, most notably in Asia, South America and Central America, are major factors affecting the need for more oil. Asia’s rising standard of living during the past five years has been responsible for around 65 percent of the world’s economic growth.

Petroleum was the largest single energy source in the OECD countries as of 2011. It was down 3 percent from 2001, which can be attributed to more efficient use of petroleum. The demand, however, continues to be affected by consumer price levels and economic growth. Other sources like hydropower and various renewable energies have seen an increase in use, but they still represent only 8 percent of the total as opposed to 38 percent by petroleum. The OECD European countries have increased their use of natural gas from 22 to 25 percent, which requires a heavier reliance on external sourcing because European production has declined. OECD countries in Asia and the Pacific have enjoyed gains in natural gas production, but they still cannot satisfy the needs of Japan and South Korea.

North America’s burgeoning oil and natural gas production is due mainly to the shale procedures of horizontal drilling and hydrologic fracking. This has improved the U.S. trade position and has lessened the need for importing petroleum. There have also been increases in the natural gas supply thanks to an increase in U.S. and Canadian production.

All of these factors signify a rosy outlook for oil and gas demand across the world. Just as an army runs on its stomach, all nations require energy. The energy sources are producing more petroleum products than they ever have to satisfy that demand.